The World Bank yesterday approved a new package of loans and grants of up to $1.05 billion for Ethiopia, just a half year after cutting off direct aid to the African nation's government in response to a brutal crackdown on opposition supporters.

By giving the aid, the bank overrode critics who view the move as contrary to the democratic ideals espoused by bank President Paul D. Wolfowitz.

The aid proposal has presented Wolfowitz with one of the thorniest dilemmas he has faced in the year since he took the World Bank's helm. As a top Pentagon official in the Bush administration, he was a prime advocate of using U.S. power to spread democracy. Although he has said the bank cannot use political criteria in granting assistance, he has stated repeatedly that he believes open and accountable governments offer the best hope for reducing corruption and improving living standards in developing countries.

Ethiopia, a nation of 75 million, was one of the favorites of aid donors until its recent crackdown on dissidents. Prime Minister Meles Zenawi, who has led the country since overthrowing its Marxist dictator in 1991, was widely regarded as a visionary leader and was even appointed to a British government commission on reducing poverty and promoting democracy in Africa. The economy has grown at a healthy clip in the past two years, offering some hope for lifting Ethiopians from the ranks of the continent's poorest people. More than half of the population lives on less than $1 a day.

But disillusion with Meles set in following elections in May 2005 that spawned violent clashes between civilians and government security forces. Although opposition groups gained a substantial number of parliamentary seats, they contended that the government had used electoral fraud and rule changes to maintain its grip on power. Security forces fired on protesters, killing scores of people, and thousands more were arrested including journalists, top opposition leaders, and intellectuals. Groups such as Human Rights Watch have accused the government of using intimidation and arbitrary detentions to squelch legitimate dissent.

Late last year, the World Bank, together with other major donors such as Britain's Department for International Development, decided to withhold about $375 million in direct support for the central government's budget. (The U.S. Agency for International Development does not provide such assistance to Ethiopia.)

Now the bank and the donors are re-engaging with Ethiopia but providing a much different form of assistance than before, on the theory that they can continue to aid the country's poor while refraining from bolstering the Meles regime. Instead of lending to the national government as it usually does, the bank will provide $215 million of its new aid to hundreds of local governments, mainly for basic services such as water, health and education.

"It's not a magic solution. It's just a completely different way of doing business," Ishac Diwan, the World Bank's country director for Ethiopia, said in an interview.

The bank's claim to bypass the national government did not impress groups opposed to Meles, who are heavily represented by members of the Ethiopian diaspora in the Washington area. In anticipation of yesterday's decision, Web sites run by opposition groups have denounced Diwan and the bank for ignoring repression that, they say, worsens the plight of the poor -- an example being local officials refusing to give fertilizer to farmers who are believed to be opposition sympathizers.

"The fact that they won't channel the money through the central government doesn't change anything," said Almaz Zewde, a professor of African Studies at Howard University. "The central government is everywhere; the local officials are their appointees. . . . In terms of the World Bank's objectives of creating good government, and trying to assist the struggle for human rights and democracy, they are working against that."

She added that although she appreciated being invited to the bank to discuss the issue along with other Meles critics, "it's regrettable that we are not heard."

Diwan said, however, "we truly put good governance at the center" of the aid program. Quarterly reviews will assess whether money is being disbursed regardless of beneficiaries' political affiliations, he said, and the government has agreed to release an unprecedented amount of information about how it is spending money at all levels, "so people can lobby for good services."